LISBON (Reuters) – Portugal’s Novo Banco needs to be able to seize the chance for an initial public offering when markets confide in listings, because it seeks to stay independent, its recent CEO Mark Bourke told Reuters on Tuesday.
Analysts have speculated that profit-making Novo Banco, which emerged from the ruins of collapsed Banco Espirito Santo in 2014 and is controlled by U.S. private equity fund Lone Star, could possibly be merged with one other lender seeking to consolidate its position in Portugal.
But Bourke, who took over in August, said that “Portugal will not be like a number of the north European countries, that are massively over-banked”, because the five largest players own 80%-85% of the banking assets, a high level of concentration.
Novo Banco is now “a profitable, well-capitalised bank that may actually compete, endure, remain independent within the Portuguese market, and may invest and expand,” he said.
The bank should construct on its recovery track record and “be ready when and if the IPO opportunity arises to make the most of it”, he said.
Bourke, who had been chief financial officer since 2019, wouldn’t say where the bank could seek to be listed, although Portuguese firms normally select Euronext Lisbon.
MASSIVE BAD LOANS CLEAN-UP
Since Lone Star bought its 75% stake in 2017, Novo Banco has focused on de-risking, closing subsidiaries abroad, offloading bad loans and real estate under tough restructuring commitments agreed with Brussels. Portugal’s Resolution Fund has the remaining 25% stake.
Non-performing loans (NPLs) fell to 1.6 billion euros ($1.60 billion), or 5% of total credit, in September from 2.2 billion a yr earlier. In 2017, its NPLs were 10.1 billion or 28% of total loans.
“The key a part of the job is finished. But we should be the European average, which is within the 2.5%-3% range… within the short to medium-term,” Bourke said.
Novo Banco’s nine-month net profit almost tripled to 428 million euros, citing improved commission income, capital market gains and a steep drop in impairments and provisions.
“This was the seventh straight quarter of profitability. We are able to generate 80 to 100 bps of capital through underlying profitability a yr – meaning we control our own destiny,” Bourke said.
Although nine-month net interest income (NII), or earnings on loans minus funding costs, fell 5.6% because of higher funding costs of senior debt issuance and other aspects, NII rose by 2.5% between July and September from the previous three months, benefiting from rate hikes by the European Central Bank.
The typical rate of its net interest margin stood at 1.29%, however the impact of the upward repricing of the portfolios should are available the fourth quarter and Novo Banco should end the yr “well above 1.5%”, the upper sure of its forecast range, he said.
(Reporting by Sergio Goncalves; editing by Elisa Martinuzzi,; Andrei Khalip and Susan Fenton)
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